Oil extends slide from 11-year low amid signs of China weakness

[HONG KONG] Oil extended declines from the lowest close in 11 years amid further signs of weakness in China, the world's second-biggest crude consumer.

Futures fell as much as 2.2 per cent in New York after dropping more than 10 per cent last week.

Producer prices in China fell for a record 46th month and inflation remained at about half the government's 2015 target. Saudi Arabian Oil Co, the world's biggest crude exporter, confirmed on Friday it was studying options for a share sale, including listing "a bundle" of refining subsidiaries, according to a statement from the state-owned oil monopoly.

Oil slumped last week as volatility in Chinese markets fueled a rout in global equities and US crude stockpiles remained about 100 million barrels above the five-year average.

Money managers began 2016 by reducing wagers on rising prices to the lowest level in more than five years.

"Sentiment indicators are all to the extreme sell," Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone. "Until we see a supply-side response, the potential for significantly higher prices is low."

West Texas Intermediate for February delivery fell as much as 73 cents to US$32.43 a barrel on the New York Mercantile Exchange and was at US$32.57 at 8.47am Hong Kong time. The contract slid 11 cents to US$33.16 on Friday, dropping for a fifth day to close at the lowest since February 2004. Total volume traded was about 30 per cent above the 100-day average. Prices lost 30 per cent last year.

CHINA VOLATILITY

Brent for February settlement decreased as much as 65 cents, or 1.9 per cent, to US$32.90 a barrel on the London-based ICE Futures Europe exchange. The contract fell 20 cents to close at US$33.55 on Friday, the lowest since June 2004. The European benchmark crude was at a premium of 37 cents to WTI.

Oil tumbled last week as investors focused on volatility in Chinese markets after the country sought to quell losses in equities and stabilise its currency.

Saudi Arabian Oil, known as Aramco, is studying whether to list "an appropriate percentage" of shares of the parent or a bundle of "downstream" units, according to an e-mailed statement Friday. The findings of the review will be presented to the board of directors, which will make recommendations to the company's Supreme Council, Aramco said.

Speculators' net-long position in WTI crude fell 24 per cent in the week ended Jan 5, data from the US Commodity Futures Trading Commission show. Longs dropped to a five-month low as shorts rose.

BLOOMBERG